SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19656
NEXTEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3939651
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1505 Farm Credit Drive, McLean, VA 22102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 394-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No
Indicate the number of shares outstanding of each of issuer's classes of
common stock as of the latest practicable date:
Number of Shares Outstanding
Title of Class on November 1, 1996
Class A Common Stock, $0.001 par value 209,994,463 (including 1,969,440
shares held in treasury)
Class B Non-Voting Common Stock, 17,830,000
$0.001 par value
<PAGE>
NEXTEL COMMUNICATIONS, INC.
INDEX
Page No.
Part I Financial Information.
Item 1. Financial Statements - Unaudited.
Condensed Consolidated Balance Sheets -
December 31, 1995 and September 30, 1996. 3
Condensed Consolidated Statements of Operations -
Nine Months Ended September 30, 1995 and 1996. 4
Condensed Consolidated Statements of Operations -
Three Months Ended September 30, 1995 and 1996. 5
Condensed Consolidated Statement of Changes in
Stockholders' Equity - Nine Months Ended
September 30, 1996. 6
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1996. 7
Notes to Condensed Consolidated Interim Financial
Statements. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 12
Part II Other Information.
Item 1. Legal Proceedings. 21
Item 6. Exhibits and Reports on Form 8-K. 21
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<PAGE>
PART I
Item 1. Financial Statements.
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
Unaudited
December 31, September 30,
1995 1996
ASSETS
Current assets:
Cash and cash equivalents $340,826 $219,508
Marketable securities 68,443 4,998
Accounts receivable, less allowance for
doubtful accounts of $5,232 and $7,169 41,451 74,237
Radios and accessories 21,220 34,308
Other 32,721 53,275
-------- --------
Total current assets 504,661 386,326
Property, plant and equipment - net 1,192,204 1,430,954
Intangible assets - net 3,549,622 3,886,286
Other noncurrent assets 266,340 285,752
-------- --------
$5,512,827 $5,989,318
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other $363,732 $189,197
Current portion of long-term debt 1,277 869
-------- --------
Total current liabilities 365,009 190,066
Deferred income taxes 549,277 376,738
Long-term debt 1,653,400 2,470,995
--------- ---------
Total liabilities 2,567,686 3,037,799
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, Class A convertible redeemable,
shares outstanding 8,163,265 and 8,163,265 300,000 300,000
Preferred stock, Class B convertible, shares
outstanding 82 and 82 -- --
Common stock, Class A, shares outstanding
175,749,359 and 209,680,304 176 210
Common stock, Class B, non-voting convertible,
shares outstanding 17,830,000 and 17,830,000 18 18
Additional paid-in capital 3,197,528 3,591,213
Accumulated deficit (579,231) (976,860)
Treasury shares - 24,860 and 1,969,440 shares (768) (1,487)
Net unrealized gain on investments 32,054 42,688
Notes receivable - incentive equity plan (1,018) (1,050)
Deferred compensation - net (3,618) (3,213)
-------- --------
Total stockholders' equity 2,945,141 2,951,519
--------- ---------
$5,512,827 $5,989,318
========== ==========
See notes to Condensed Consolidated Interim Financial Statements
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<PAGE>
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For The Nine Months Ended September 30, 1995 and 1996
(Dollars in Thousands, Except Share Data)
Unaudited
1995 1996
---- ----
REVENUES:
Radio service revenue $ 83,338 $ 208,737
Analog equipment sales and maintenance 27,414 28,240
--------- ---------
110,752 236,977
COSTS AND EXPENSES RELATED TO REVENUES:
Cost of radio service revenue 70,245 156,708
Cost of analog equipment sales and maintenance 21,083 20,848
Selling, general and administrative 127,462 234,725
Expenses related to corporate reorganization 17,372 --
Depreciation and amortization 151,392 291,698
387,554 703,979
OPERATING LOSS (276,802) (467,002)
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense (71,560) (165,524)
Interest income 19,644 17,953
--------- ---------
(51,916) (147,571)
LOSS BEFORE INCOME TAX BENEFIT (328,718) (614,573)
INCOME TAX BENEFIT 116,403 216,944
--------- ---------
NET LOSS $(212,315) $(397,629)
========= =========
NET LOSS PER COMMON SHARE $ (1.68) $ (1.80)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 126,636,000 221,309,000
=========== ===========
See Notes to Condensed Consolidated Interim Financial Statements
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<PAGE>
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 1995 and 1996
(Dollars in Thousands, Except Share Data)
Unaudited
1995 1996
---- ----
REVENUES:
Radio service revenue $ 41,319 $ 82,884
Analog equipment sales and maintenance 9,755 8,156
---------- ---------
51,074 91,040
COSTS AND EXPENSES RELATED TO REVENUES:
Cost of radio service revenue 38,038 54,695
Cost of analog equipment sales and maintenance 7,617 6,129
Selling, general and administrative 52,839 83,985
Expenses related to corporate reorganization 17,372 --
Depreciation and amortization 68,648 105,869
---------- ---------
184,514 250,678
OPERATING LOSS (133,440) (159,638)
---------- ---------
OTHER INCOME (EXPENSE):
Interest expense (28,203) (58,783)
Interest income 8,134 4,744
---------- ---------
(20,069) (54,039)
LOSS BEFORE INCOME TAX BENEFIT (153,509) (213,677)
INCOME TAX BENEFIT 51,375 64,794
---------- ---------
NET LOSS $ (102,134) $(148,883)
========== =========
NET LOSS PER COMMON SHARE $ (0.61) $ (0.66)
=========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 166,881,000 225,367,000
=========== ===========
See Notes to Condensed Consolidated Interim Financial Statements.
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<PAGE>
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes In Stockholders' Equity
For the Nine Months Ended September 30, 1996
(Dollars in Thousands)
Unaudited
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NOTES
NET RECEIVABLE
CLASS A CLASS B CLASS A CLASS B ADDITIONAL UNREALIZED - INCENTIVE DEFERRED
PREFERRED PREFERRED COMMON COMMON PAID-IN ACCUMULATED TREASURY GAIN ON EQUITY COMPEN-
STOCK STOCK STOCK STOCK CAPITAL DEFICIT SHARES INVESTMENTS PLAN SATION
----- ----- ----- ----- ------- -------- ------- ----------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1996 $300,000 $ -- $ 176 $ 18 $3,197,528 $(579,231) $ (768) $32,054 $(1,018) $ (3,618)
Issuances under
incentive
equity plan,
warrants and
other 3 6,640 (719)
Common stock
issued for
acquisitions 23 282,687
Common stock
acquired by
Comcast 8 99,897
Deferred
compensation
and related
amortization
and collection
of notes
receivable 4,461 (32) (405)
Net unrealized
appreciation
on investments 10,634
Net loss (397,629)
-------- ------ ------- ----- ---------- ---------- -------- ------- -------- ----------
BALANCE,
SEPTEMBER 30,
1996 $300,000 $ -- $ 209 $ 18 $3,591,213 $(976,860) $(1,487) $42,688 $(1,050) $ (3,213)
======== ====== ====== ===== ========== ========== ======== ======= ======== =========
</TABLE>
See Notes to Condensed Consolidayed Interim Financial Statements.
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<PAGE>
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1996
(Dollars in Thousands)
Unaudited
1995 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(212,315) $(397,629)
Adjustment to reconcile net loss to net
cash used in operating activities 101,058 83,974
-------- --------
Net cash used in operating activities (111,257) (313,655)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in other assets 8,283 9,491
Payments for acquisitions and purchase of licenses,
net of cash acquired (64,688) 33,665
Capital expenditures (121,493) (46,211)
Decrease in marketable securities 88,557 64,452
-------- --------
Net cash (used in) provided by investing
activities (89,341) 61,397
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving line of credit borrowings (repayments), net -- (268,704)
Long-term borrowings -- 331,408
Other long-term repayments, net (1,606) (1,068)
Debt issuance costs -- (37,336)
Common stock issued, options exercised 1,753 6,735
Common stock issued 12,645 99,905
Preferred stock issued 300,000 --
Net cash provided by financing activities 312,792 130,940
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 112,194 (121,318)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 301,679 340,826
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $413,873 $219,508
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 7,274 $ 29,779
======== ========
Taxes paid $ 387 $ 1,085
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Acquisition of equipment, including non-cash
capitalized interest $108,964 $125,241
======== ========
Borrowings from vendor to finance equipment
purchases $ 9,742 $220,221
======== ========
See Notes to Condensed Consolidated Interim Financial Statements
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<PAGE>
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Interim Financial Statements
September 30, 1996
Unaudited
Note 1 - Basis of Presentation
The condensed consolidated interim financial statements of Nextel
Communications, Inc. and subsidiaries ("Nextel" or the "Company") included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "Commission") and
reflect all adjustments that are, in the opinion of management, necessary for a
fair statement of the results for the interim periods. All adjustments made were
normal recurring accruals.
The interim financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995. Operating results for the
interim periods are not necessarily indicative of results for an entire year.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of" ("SFAS 121"). There was no
material effect from the adoption of SFAS 121.
Certain amounts presented for the periods ended September 30, 1995 have been
reclassified to conform to the presentation for the periods ended September 30,
1996.
Note 2 - Business Combinations and Other Significant Transactions
Dial Page Merger. On January 30, 1996, the merger with Dial Page, Inc.
("Dial Page") was consummated (the "Dial Page Merger"), whereby the stockholders
of Dial Page received approximately 26,800,000 shares of Class A Common Stock,
par value $0.001 per share ("Class A Common Stock"), or rights to receive such
stock, having an aggregate value of approximately $277,892,000 on the contract
date.
The Dial Page Merger has been accounted for by the purchase method.
Accordingly, assets and liabilities acquired have been reflected at fair value,
which may be subject to further refinement. The operating results of Dial Page
are included in the condensed consolidated statements of operations from the
acquisition date.
Pro Forma Operations Data. The following pro forma statements of operations
data gives effect to the Dial Page Merger, and to the completion on July 28,
1995 of the transactions with Motorola, Inc. ("Motorola") (the "Motorola
Transaction") and with OneComm Corporation ("OneComm") (the "OneComm Merger")
and to the completion on July 31, 1995 of the transaction with American Mobile
Systems Incorporated ("AMS") (the "AMS Transaction"), assuming such transactions
had been consummated at the beginning of the earliest period presented (in
thousands, except per share data):
Nine Months Ended
September 30,
---------------------------
1995 1996
---- ----
Revenue $ 224,249 $ 239,815
========== ==========
Net loss $ (387,054) $ (405,525)
========== ==========
Net loss per share $ (1.72) $ (1.81)
========== ==========
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<PAGE>
The pro forma information is not necessarily indicative of the results that
would have actually occurred had the transactions been consummated on the dates
indicated, nor are they necessarily indicative of future operating results of
the Company.
Comcast Exercise of Purchase Rights. On February 9, 1996, Comcast FCI, Inc.,
a subsidiary of Comcast Corporation (collectively, "Comcast"), purchased
8,155,506 shares of Class A Common Stock for $99,905,000 in connection with its
exercise of its anti-dilution rights to purchase shares in connection with the
Dial Page Merger.
Note 3 - Digital Mobile Network Equipment Sales and Related Costs
Effective January 1, 1996, in order to conform its presentation to that of
the majority of wireless communications companies, the Company classified
equipment sales revenue, and related costs for the operation of its advanced
mobile communications systems employing digital technology (the "Digital Mobile
networks") within selling, general and administrative expenses. The loss on the
sale of subscriber units used in the Digital Mobile networks ("Digital Mobile
units") results from the Company's subsidy of Digital Mobile units sales and
represents marketing costs for the Digital Mobile network. Sales of analog
subscriber units result in a contribution to gross margin that is anticipated to
continue in the foreseeable future; accordingly, sales of analog subscriber
units will continue to be classified as revenue and the associated costs will
continue to be classified as cost and expenses related to revenue. The
statements of operations for the three months and the nine months ended
September 30, 1995 have been reclassified to conform with this presentation.
Equipment sales and related costs of the Company's Digital Mobile network
operations are included within selling, general and administrative expenses as
follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
1995 1996 1995 1996
---- ---- ---- ----
Equipment sales $ 14,269 $32,059 $ 34,580 $ 90,353
Cost of equipment sales 16,210 36,105 37,649 100,998
-------- ------- ------- ---------
$ (1,941) $(4,046) $(3,069) $(10,645)
======== ======= ======= ========
Note 4 - Net Loss Per Share
The net loss per share is based on the weighted average number of voting and
non-voting common shares outstanding during the periods and does not include
common stock equivalents since their effect would be anti-dilutive.
Note 5 - Long-Term Debt
Nextel, Nextel Finance Company ("NFC"), a wholly-owned subsidiary of Nextel,
and certain subsidiaries of Nextel entered into definitive agreements, which
became effective on September 30, 1996 with respect to a secured credit facility
arranged by Chase Securities, Inc., J.P. Morgan Securities, Inc. and
Toronto-Dominion Securities (USA), Inc. (the "Bank Credit Facility"). The Bank
Credit Facility provides for up to $1,655,000,000 of secured financing,
consisting of $1,085,000,000 in revolving loans and $570,000,000 in term loans.
The commitments to make revolving loans are reduced beginning March 31, 2001
with final maturities of the revolving loans occurring on March 31, 2003.
Quarterly principal payments on the term loans commence March 31, 2001 with
final maturities on June 30, 2003. Concurrently therewith, Nextel, NFC and
certain subsidiaries of Nextel entered into definitive agreements, which also
became effective on September 30, 1996, with respect to
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<PAGE>
the amendment, restatement and consolidation of the previously existing
financing arrangements with Motorola and NTFC Capital Corporation
("NTFC") (the "Vendor Credit Facility"). The Vendor Credit Facility
supersedes the prior financing agreements and provides for up to $345,000,000
of secured financing, consisting of a $195,000,000 revolving loan and
$150,000,000 in term loans with, revolving credit commitment reductions and
term loan payments parallel to those of the Bank Credit Facility.
Borrowings under the Bank Credit Facility and Vendor Credit Facility are
ratably secured by liens on assets of Nextel's subsidiaries that are
"restricted" subsidiaries under the terms of Nextel's public indentures. As of
September 30, 1996, Nextel had drawn $368,000,000 of its available financing
under the Bank Credit Facility, leaving an aggregate of $1,287,000,000 available
for borrowing under such facility. Additionally, Nextel had drawn $150,000,000
of its available financing under the Vendor Credit Facility, leaving an
aggregate of $195,000,000 available for borrowing under such facility. The
proceeds from these borrowings were used primarily to partially repay the
outstanding principal and accrued interest under the prior financing agreements
with Motorola and NTFC. Interest on the outstanding principal balances of the
two Credit Facilities is calculated based on an adjusted rate calculated either
on the Prime Rate or the London Interbank Offered Rate (LIBOR). As of September
30, 1996, interest on the loans ranged from 9.25% to 10.25% .
Note 6 - Interest Rate Swap
In October 1996, NFC entered into an interest rate swap agreement with a
notional amount of $320,000,000 which will convert floating rate debt into fixed
rate obligations with an effective interest rate of 5.9%. This swap commenced on
October 2, 1996 for a one-year period expiring on October 2, 1997.
Note 7 - Subsequent Events
Pittencrieff Transaction. In October 1996, the Company entered into a
definitive agreement with Pittencrieff Communications, Inc. ("Pittencrieff"), a
specialized mobile radio ("SMR") operator with SMR licenses in Texas, Oklahoma,
New Mexico and Arizona, providing for the merger of Pittencrieff with a
wholly-owned indirect subsidiary of the Company (the "Pittencrieff
Transaction"). Pursuant to the Pittencrieff Transaction, the Company will issue
a maximum of approximately 8,780,000 shares of Class A Common Stock, subject to
certain adjustments, in exchange for all of the outstanding shares (or rights to
acquire shares) of Pittencrieff stock. The maximum dollar value of the shares of
Class A Common Stock to be issued to the Pittencrieff shareholders is set at
$170,000,000 (subject to certain adjustments). Accordingly, if the price of the
Class A Common Stock exceeds $19.36 at the closing of the Pittencrieff
Transaction, the number of shares to be issued to the Pittencrieff shareholders
would be decreased so that the total maximum dollar value threshold would not be
exceeded. The closing of the Pittencrieff Transaction, which is subject to
certain conditions, including regulatory approval and the approval of the
Pittencrieff shareholders, is expected to occur during the first half of 1997.
The Pittencrieff Transaction, when completed, will be accounted for by the
purchase method.
Mobilcom Transaction. In August 1996, a wholly-owned subsidiary of the
Company entered into an agreement to purchase up to an additional 19.8% equity
interest in Corporacion Mobilcom S.A. de C.V. ("Mobilcom"), a Mexican SMR
operator, from certain shareholders of Mobilcom in two tranches. In October
1996, such subsidiary completed the acquisition of the first tranche by
acquiring an additional 11.6% equity interest in Mobilcom in exchange for
1,319,902 shares of the Company's Class A Common Stock. As of November 1, 1996,
the Company's equity interest in Mobilcom was approximately 30.1%, not including
any of the Mobilcom shares that would be acquired upon consummation of the
second tranche purchase nor any of the Mobilcom shares currently subject to
options or other arrangements providing for potential acquisition thereof by a
wholly-owned subsidiary of the Company.
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<PAGE>
WVB Transaction. In October 1996, the Company entered into an agreement
and plan of merger with Wireless Ventures of Brazil, Inc.("WVB"), an SMR
operator in Brazil, providing for the merger of WVB with a wholly-owned
subsidiary of Nextel (the "WVB Transaction"). Nextel will issue $186,300,000
of its Class A Common Stock to the WVB shareholders in exchange for 81% of the
outstanding shares of WVB common stock. The exact number of shares of Class A
Common Stock to be issued to the WVB shareholders will be determined based on
the average closing price of the Class A Common Stock on the Nasdaq Stock
Market during the 20-day trading period beginning on October 29, 1996. The
closing of the WVB Transaction is subject to United States regulatory approvals,
the approval of the WVB shareholders and customary closing conditions. The WVB
Transaction, when completed, will be accounted for by the purchase method.
* * * * *
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
The following is a discussion of the condensed consolidated financial
condition and results of operations of Nextel for the nine and three month
periods ended September 30, 1995 and 1996, and certain factors that could affect
the Company's prospective financial condition.
To further its objective of achieving nationwide Digital Mobile network
coverage, Nextel consummated the Motorola Transaction, the OneComm Merger and
the AMS Transaction in July 1995 and consummated the Dial Page Merger on January
30, 1996 (hereinafter referred to collectively as the "Acquisitions"). Also in
July 1995, pursuant to a securities purchase agreement dated as of April 4, 1995
between the Company, Digital Radio, L.L.C. (the "McCaw Investor") and Craig O.
McCaw, the Company consummated an equity investment in Nextel by the McCaw
Investor, pursuant to which Nextel received net equity investment proceeds
totaling approximately $312,645,000 (including amounts received in April 1995)
and issued shares of common and preferred stock and stock options expiring at
various dates through July 28, 2001 (the "McCaw Transaction"). Funds received in
the McCaw Transaction are being used for the implementation and operation of the
Digital Mobile networks and to satisfy other cash requirements of the Company.
In April 1996, the Federal Communications Commission (the "FCC") concluded
its auction of 900 MHz SMR frequencies. Nextel successfully bid a total of
approximately $29,079,000 for 177 ten-channel licenses in markets throughout the
United States, including Alaska and Hawaii. The Company made final payment to
the FCC for these licenses in July 1996. The Company intends to use the newly
acquired 900 MHz licenses in its ongoing wireless communications operations,
including as part of its ongoing process of transferring its analog SMR
customers from certain 800 MHz frequencies to 900 MHz or other 800 MHz
frequencies.
In October 1996, the Company announced the Pittencrieff Transaction,
pursuant to which Pittencrieff will merge with a wholly-owned indirect
subsidiary of the Company. The closing of the Pittencrieff Transaction, which is
subject to certain conditions, including regulatory approval and the approval of
the Pittencrieff shareholders, is expected to occur during the first half of
1997.
The Company also has pursued various international investment and operating
relationships in wireless communications ventures. In 1994, the Company invested
an aggregate of approximately $18,100,000 in cash and exchanged 2,500,000 shares
of Class A Common Stock for an equity interest in Clearnet Communications Inc.
("Clearnet") that as of September 30, 1996 represented an approximate 19.3%
equity interest (representing an approximate 1.7% voting interest) in Clearnet.
Clearnet operates wireless communications systems in Canada and in 1995 was one
of two entities awarded a nationwide personal communications services ("PCS")
license in Canada.
In 1994 and 1995, the Company invested an aggregate of approximately
$57,200,000 for an approximate 18% equity interest in Mobilcom, a Mexican SMR
operator, and obtained options to increase its equity interest in Mobilcom. In
August 1996, a wholly-owned subsidiary of the Company entered into an agreement
to purchase up to an additional 19.8% equity interest in Corporacion Mobilcom
S.A. de C.V. ("Mobilcom"), a Mexican SMR operator, from certain shareholders of
Mobilcom in two tranches. In October, 1996, such subsidiary completed the
acquisition of the first tranche by acquiring an additional 11.6% equity
interest in Mobilcom in exchange for 1,319,902 shares of Class A Common Stock.
As of November 1, 1996, the Company's equity interest in Mobilcom was
approximately 30.1%, not including any of the Mobilcom shares that would be
acquired upon consummation of the second tranche purchase nor any of the
Mobilcom shares currently subject to options or other arrangements providing for
potential acquisition thereof by a wholly-owned subsidiary of the Company.
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<PAGE>
In 1995, the Company, through its wholly-owned subsidiary McCaw
International, Ltd. ("McCaw International"), invested approximately $10,000,000
for an approximate 25.2% equity-equivalent interest and committed an additional
$13,200,000 in loan funding in the initial phase of a newly created Group
Special Mobile digital cellular telephone system operating in Shanghai, China.
McCaw International advanced a total of $10,300,000 of such loan funding to the
Shanghai operations in the first nine months of 1996.
In June 1996, McCaw International invested $16,000,000 for a 30% equity
interest in Infocom Communications Network, Inc. ("Infocom"), a wireless
communications company in the Philippines. Infocom currently operates a
nationwide paging business and has 100 pairs of 800 MHz SMR channels in the
Philippines. Infocom was recently awarded a 25-year license by the Philippine
government to provide wireless communications services throughout the
Philippines. The license allows Infocom to provide paging and SMR services, and
gives Infocom the right to seek authority to operate a personal communications
network throughout the Philippines. Infocom plans to use its SMR channels to
implement a national digital network using the same Motorola-developed digital
technology deployed by Nextel in its United States Digital Mobile networks (such
technology is referred to as the "Integrated Digital Enhanced Network" or
"iDEN").
In August 1996, McCaw International obtained 100% ownership of Com Control
Comunicacion Controlada S.A. (renamed McCaw Argentina S.A., "McCaw Argentina"),
an Argentine SMR company with 800 MHz SMR licenses in areas covering more that
17 million people. Through McCaw International, the Company invested
approximately $15,600,000 in the form of cash and equipment to acquire McCaw
Argentina. The acquisition has been accounted for by the purchase method. McCaw
Argentina intends to provide wireless communications services in Buenos Aires
and the next three largest cities in Argentina. McCaw Argentina will focus
initially on providing high-quality analog SMR service and ultimately digital
service.
In October 1996, the Company announced the WVB Transaction, pursuant to
which the Company will issue $186,300,000 of its Class A Common Stock to WVB
shareholders in exchange for 81% of the outstanding shares of WVB common stock
and WVB will merge with a wholly-owned subsidiary of Nextel. The closing of the
WVB Transaction is subject to United States regulatory approvals, the approval
of the WVB shareholders and customary closing conditions.
The Company intends to continue to investigate and pursue investment,
operating and other relationships in, with or concerning wireless communications
ventures outside the United States, to the extent the Company believes that such
opportunities present the potential to achieve attractive rates of return on
investment or to provide important strategic or other benefits to the Company.
For the most part, such activities have been, and are expected to continue to
be, pursued through subsidiaries of the Company that are classified as
"unrestricted" for purposes of the Company's public indentures. While such
classification gives those subsidiaries the flexibility to participate in and
structure transactions in ways that comply with the covenants in the public
indentures that are applicable to the Company and its "restricted" subsidiaries,
those indentures do contain certain limitations with respect to such
"unrestricted" subsidiaries, including limits on the amount and type of
financial support that they may receive from the Company and its "restricted"
subsidiaries. Currently, the Company believes that these "unrestricted"
subsidiaries have or can obtain (in a manner consistent with the terms of the
public indentures) adequate funding to satisfy their existing and reasonably
expected commitments. The pursuit of international wireless communications
opportunities in the future by such "unrestricted" subsidiaries, however, may be
dependent on, among other factors, their ability to secure necessary equity
and/or debt financing from third parties. There can be no assurance that such
financing could be obtained or, if obtainable, would be made available on
acceptable terms. See also "--Future Capital Needs and Resources" and
"--Forward-Looking Statements."
-13-
<PAGE>
Prior to the second quarter of 1996, the Company implemented its Digital
Mobile networks in its market areas using Motorola's "first generation" iDEN
technology. During that time frame, the Company encountered certain technology
and system performance issues relating to the "first generation" iDEN technology
that resulted in delays in the implementation of its plans to deploy its Digital
Mobile networks and in the commencement of aggressive marketing efforts with
respect to its communications products and services, particularly its mobile
telephone services. These technology and system performance issues related
primarily to the voice transmission quality of the mobile telephone service.
In response to these issues, the Company and Motorola have undertaken, and
continue to undertake, system enhancement efforts to address various
circumstances believed to adversely affect system performance and customer
satisfaction, particularly those associated with voice transmission quality. The
Company anticipates that such system enhancement efforts will be a continuing
component of the normal ongoing technology optimization process. Additionally,
independent of such system enhancement efforts, the Company, together with
Motorola, is pursuing a significant program directed toward the development and
deployment of modifications to the "first generation" iDEN technology platform,
to be known as Reconfigured iDEN, designed principally to produce improvements
in voice transmission quality. Nextel and Motorola have been encouraged by their
experience to date in the Reconfigured iDEN development and deployment process.
All significant technology performance benchmarks, development process targets
and key event schedules relating to the development and deployment of
Reconfigured iDEN have been achieved or satisfied to date substantially as
contemplated and originally agreed to by Nextel and Motorola.
Based on its experiences with the Reconfigured iDEN technology, including
the feedback received in customer trials and various other inputs and
considerations, the Company announced the first full-scale commercial launch of
the Reconfigured iDEN Digital Mobile network in the Chicago market in the third
quarter of 1996, accompanied by the commencement of a more broadly-focused
marketing campaign in that market area. In October and November 1996, the
Company announced full-scale commercial launches, accompanied by more
broadly-focused marketing campaigns, in the Atlanta, Boston, Denver, Detroit and
Las Vegas markets. The Company's commercial launch activities in these markets
represent the first phase of an anticipated rapid nationwide deployment of the
Reconfigured iDEN technology in the Company's significant Digital Mobile
markets. The Company currently is developing and refining a nationwide build-out
plan for Digital Mobile networks incorporating the Reconfigured iDEN technology
based on an anticipated implementation schedule during 1996 to 1998, which it
currently expects will involve budgeted capital expenditures totaling
approximately $1.2 billion. In this connection, the Company anticipates that
purchases of Motorola-manufactured infrastructure equipment will represent the
largest category of capital spending. Since June 1996, Nextel has placed orders
with Motorola totaling more than $300 million of products incorporating the
Reconfigured iDEN technology, including system infrastructure equipment and
related software and the new, compact Reconfigured iDEN handsets that the
Company plans to market nationally, principally under the "PowerFone"(R)(TM)
brand name. Assuming the successful and timely completion of such build-out
plan, the Company expects that its Digital Mobile networks would provide
coverage to areas representing approximately 85% of the United States population
by the end of 1998. Implementation of such a rapid nationwide deployment
strategy for Reconfigured iDEN would likely significantly accelerate the
Company's use of and needs for capital resources and would therefore be
dependent on, among other things, availability of necessary capital. See also
"--Future Capital Needs and Resources" and "--Forward-Looking Statements."
-14-
<PAGE>
Results of Operations
Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1995
Total revenues for the nine months ended September 30, 1996 increased 114.0%
to $236,977,000, compared to $110,752,000 for the nine months ended September
30, 1995. Radio service revenue for the nine months ended September 30, 1996
increased 150.5% to $208,737,000, compared to $83,338,000 for the nine months
ended September 30, 1995. Analog equipment sales and maintenance revenue for the
nine months ended September 30, 1996 increased 3.0% to $28,240,000, compared to
$27,414,000 for the nine months ended September 30, 1995. Digital Mobile network
equipment revenue, which is classified as selling, general and administrative
expenses (see Note 3 to the Condensed Consolidated Interim Financial
Statements), for the nine months ended September 30, 1996 increased 161.3% to
$90,353,000, compared to $34,580,000 for the nine months ended September 30,
1995.
Radio Service. The increase in radio service revenue was principally a
result of an increase in analog SMR units in service attributable to the
completed Acquisitions, the commencement of Digital Mobile network service in
certain markets during 1996 and the increased sales in markets that commenced
Digital Mobile network services in 1994 and 1995.
The total number of units in service as of September 30, 1996 increased
25.6% to approximately 1,044,000, from approximately 831,000 as of September 30,
1995, reflecting growth primarily from the commencement of Digital Mobile
network service in certain markets during 1996 and increased sales in markets
that commenced Digital Mobile network service in 1994 and 1995 and, to a lesser
extent, from the Acquisitions. The following table summarizes the overall
growth:
Units in Service as of
September 30,
1995 1996 Change
Analog SMR service 770,000 816,000 46,000
Digital Mobile Network service 61,000 228,000 167,000
------- -------- -------
Total 831,000 1,044,000 213,000
======= ========= =======
The average churn rate for the Digital Mobile networks operation was less
than 1% per month for the nine months ended September 30, 1996. There was
insufficient history of customer activity on the Digital Mobile networks as of
September 30, 1995 to derive a meaningful churn rate for the nine months ended
on such date. The average churn rate for the analog SMR operations for the nine
months ended September 30, 1996 was 1.8%, up from the rate of 1.4% for the nine
months ended September 30, 1995 (not including, for purposes of the nine months
ended September 30, 1995, the OneComm, AMS, Motorola and Dial Page operations,
for which consolidated and consistent churn data for the period prior to
completion of the respective transactions is not available). The increase was
due principally to reductions in analog capacity resulting from the migration of
frequencies from the analog SMR systems to Digital Mobile networks and higher
churn rates experienced in the operations represented by certain of the
Acquisitions.
Equipment Sales and Maintenance Revenue. Total equipment sales and
maintenance revenue (before the reclassification described in Note 3 to the
Condensed Consolidated Interim Financial Statements) for the nine months ended
September 30, 1996 increased 91.3% to $118,593,000, compared to $61,994,000 for
the nine months ended September 30, 1995. The increase resulted principally from
equipment sales revenue from Digital Mobile unit sales. Analog equipment sales
and maintenance revenue increased slightly, primarily due to
-15-
<PAGE>
increased maintenance revenue associated with analog SMR units acquired in the
Motorola Transaction. Nextel's analog SMR unit sales are expected to decrease
as a result of the Company's continuing focus away from the sale of analog
SMR radios and migration of analog SMR customers to the Digital Mobile network
service in the markets in which Digital Mobile networks have begun operating.
Costs and Expenses Related to Revenues. Cost of radio service revenue for
the nine months ended September 30, 1996 increased 123.1% to $156,708,000,
compared to $70,245,000 for the nine months ended September 30, 1995, primarily
as a result of an increase in analog SMR units in service attributable to the
completed Acquisitions, the commencement of Digital Mobile network service in
certain markets during 1996 and the increased sales in markets that commenced
Digital Mobile network service in 1994 and 1995. The direct costs associated
with the Digital Mobile networks, such as site rental and telephone expenses,
will continue to increase as networks are placed into service.
Selling, general and administrative expenses for the nine months ended
September 30, 1996 increased 84.2% to $234,725,000, compared to $127,462,000 for
the nine months ended September 30, 1995. The increase related to the
Acquisitions and increased staffing and other activities to support the
implementation and operation of the Digital Mobile networks. Selling, general
and administrative expenses include a loss on Digital Mobile equipment sales of
$10,645,000, compared to a loss of $3,069,000 for the nine months ended
September 30, 1995, reflecting, in part, the continued effect of customer
subsidies or discounts on increased sales of Digital Mobile units during the
nine months ended September 30, 1996. The Company anticipates that it will
continue to offer customers subsidies or discounts in connection with the sale
and installation of Digital Mobile units as a part of its overall Digital Mobile
network service offering.
Expenses related to the corporate reorganization for the nine months ended
September 30, 1995 were a result of the estimated employee and facility related
costs resulting from the consolidation, resizing and relocation of the Company's
headquarters and customer care operations in connection with the Acquisitions.
No such costs were recorded during the nine months ended September 30, 1996.
Depreciation and amortization for the nine months ended September 30, 1996
increased 92.7% to $291,698,000, compared to $151,392,000 for the nine months
ended September 30, 1995, reflecting the effect of the Acquisitions and the
activation of additional Digital Mobile networks. System assets relating to the
development of Digital Mobile networks represent the largest portion of capital
expenditures during the period. Depreciation and amortization of such assets
begins upon commencement of commercial service in each market. The Company
anticipates that depreciation and amortization expense will continue to increase
as a result of the activation of additional Digital Mobile networks during 1996
and 1997, the deployment of additional depreciable assets in markets where
commercial service has commenced and as "first generation" iDEN Digital Mobile
networks are converted to the Reconfigured iDEN technology platform over the
next several years.
Interest income for the nine months ended September 30, 1996 decreased 8.6%
to $17,953,000, compared to $19,644,000 for the nine months ended September 30,
1995. The decrease relates to the utilization of cash for the development and
implementation of the Company's Digital Mobile networks and for the
Acquisitions. Interest expense for the nine months ended September 30, 1996
increased 131.3% to $165,524,000, compared to $71,560,000 for the nine months
ended September 30, 1995, reflecting increased interest expense attributable to
the assumption of OneComm's Senior Redeemable Discount Notes due 2004 and the
Dial Call Senior Redeemable Discount Notes due 2004 and 2005 assumed in the
Acquisitions and interest expense attributable to increased borrowings under the
Company's Bank Credit Facility and Vendor Credit Facility. The increase in
interest expense was also attributable to a reduction in capitalized interest
relating to construction in progress of Digital Mobile networks. During the nine
months ended September 30, 1996, the Company capitalized interest of
$22,784,000, compared to $30,342,000 for the nine months ended September 30,
1995.
-16-
<PAGE>
The deferred tax benefit for the nine months ended September 30, 1996
increased 86.4% to $216,944,000, compared to $116,403,000 for the nine months
ended September 30, 1995. These benefits were derived from the recognition of
net operating losses which can be utilized against future deferred tax
liabilities.
Three Months Ended September 30, 1996 vs.Three Months Ended September 30, 1995
Total revenues for the three months ended September 30, 1996 increased 78.3%
to $91,040,000, compared to $51,074,000 for the three months ended September 30,
1995. The increase relates primarily to an increase in radio service revenues
offset by a $1,599,000 decrease in analog SMR equipment sales and revenues. Cost
of radio service revenue increased $16,657,000 or 43.8% while cost of analog SMR
equipment sales and maintenance decreased $1,488,000 or 19.5%. The increases in
radio service revenue and cost of radio service revenue was principally a result
of an increase in analog SMR units in service attributable to the completed
Acquisitions, the commencement of Digital Mobile network service in certain
markets during 1996 and the increased sales in markets that commenced Digital
Mobile network services in 1994 and 1995. The decrease in analog equipment sales
and revenues and the related cost of equipment sales is a result of the
Company's continuing focus away from the sale of analog SMR radios and migration
of analog SMR customers to the Digital Mobile network service in the markets in
which Digital Mobile networks have begun operating.
Selling, general and administrative expenses for the three months ended
September 30, 1996 increased 58.9% to $83,985,000, compared to $52,839,000 for
the three months ended September 30, 1995. The increase related to the
Acquisitions and increased staffing and other activities to support the
implementation and operation of the Digital Mobile networks. Selling, general
and administrative expenses include a loss on Digital Mobile equipment sales of
$4,046,000 for the three months ended September 30, 1996, compared to a loss of
$1,941,000 for the three months ended September 30, 1995, reflecting, in part,
the continued effect of customer subsidies or discounts on increased sales of
Digital Mobile units during the period ended September 30, 1996. The Company
anticipates that it will continue to offer customers subsidies or discounts in
connection with the sale and installation of Digital Mobile units as a part of
its overall Digital Mobile network service offering.
Expenses related to the corporate reorganization for the three months ended
September 30, 1995 were a result of the estimated employee and facility related
costs resulting from the consolidation, resizing and relocation of the Company's
headquarters and customer care operations in connection with the Acquisitions.
No such costs were recorded during the three months ended September 30, 1996.
Depreciation and amortization for the three months ended September 30, 1996
increased 54.2% to $105,869,000, compared to $68,648,000 for the three months
ended September 30, 1995, reflecting the effect of the Acquisitions and the
activation of additional Digital Mobile networks.
Interest income for the three months ended September 30, 1996 decreased
41.7% to $4,744,000, compared to $8,134,000 for the three months ended September
30, 1995, reflecting the utilization of cash and cash equivalents and marketable
securities for the development and implementation of the Company's Digital
Mobile networks and for acquisitions. Interest expense for the three months
ended September 30, 1996 increased 108.4% to $58,783,000, compared to
$28,203,000 for the three months ended September 30, 1995, reflecting increased
interest expense attributable to the OneComm Senior Redeemable Discount Notes
due 2004 and the Dial Call Senior Redeemable Discount Notes due 2004 and 2005
assumed in the Acquisitions and interest expense attributable to increased
borrowings under the Company's Bank Credit Facility and Vendor Credit Facility.
The increase in interest expense was also attributable to a reduction in
capitalized interest relating to construction in progress of Digital Mobile
networks. During the three months ended September 30, 1996, the Company
capitalized interest of $10,031,000, compared to $10,155,000 for the three
months ended September 30, 1995.
-17-
<PAGE>
The deferred tax benefit for the three months ended September 30, 1996
increased 26.1% to $64,794,000, compared to $51,375,000 for the three months
ended September 30, 1995. These benefits were derived from the generalization of
net operating losses which can be utilized against future deferred tax
liabilities. The effective tax rate decreased from 33.5% to 30.3% for the three
months ended September 30, 1995 and 1996, respectively, as a result of an
adjustment to the Company's estimate of the anticipated 1996 annualized
effective tax rate.
Liquidity and Capital Resources
The Company had net losses of $397,629,000 and $331,165,000 for the nine
months ended September 30, 1996 and the year ended December 31, 1995,
respectively. The costs of developing and operating the Digital Mobile networks
have offset the operating earnings of the analog SMR operations, including those
acquired in the Acquisitions, and are expected to continue to offset such
operating earnings for the next several years. The Company has consistently used
external sources of funds, primarily from equity issuances and the incurrence of
debt, to fund operations, acquisitions and capital expenditures. For the next
several years, the Company anticipates using its existing cash and investments,
cash flow from analog SMR operations, and externally generated funds from debt
and equity sources as discussed below to cover future needs, including the
design, implementation and operation of the Digital Mobile networks.
Working capital as of September 30, 1996 increased 40.5% to $196,260,000,
compared to $139,652,000 at December 31, 1995. The increase in working capital
is primarily a result of the financing of accounts payable due to Motorola (see
"Bank Credit Facility and Vendor Credit Facility") offset by a decrease in cash
and cash equivalents and marketable securities. Cash and cash equivalents and
marketable securities decreased as a result of the utilization of cash and cash
equivalents for the development and implementation of the Company's Digital
Mobile networks and for acquisitions.
Bank Credit Facility and Vendor Credit Facility. Effective September 30,
1996, Nextel, NFC, and certain subsidiaries of Nextel entered into the Bank
Credit Facility. Concurrently therewith, Nextel, NFC and certain subsidiaries of
Nextel entered into the Vendor Credit Facility, Which superseded the prior
financing agreement among Nextel, certain of its subsidiaries, Motorola and
NTFC.
The Bank Credit Facility provides for up to $1,655,000,000 of secured
financing, consisting of a $1,085,000,000 revolving loan and $570,000,000 in
term loans. The Vendor Credit Facility provides for up to $345,000,000 of
secured financing, consisting of a $195,000,000 revolving loan and $150,000,000
in term loans. Borrowings under the Bank Credit Facility and the Vendor Credit
Facility are ratably secured by liens on assets of Nextel's subsidiaries that
are "restricted" subsidiaries under the terms of Nextel's public indentures. As
of September 30, 1996, Nextel had drawn approximately $368,000,000 of its
available financing under the Bank Credit Facility, leaving an aggregate of
approximately $1,287,000,000 available for borrowing under such facility, and
had drawn $150,000,000 of its available financing under the Vendor Credit
Facility, leaving an aggregate of approximately $195,000,000 available for
borrowing under such facility, subject in each case to the satisfaction or
waiver of applicable borrowing conditions. The proceeds from these borrowings
were used primarily to repay the outstanding principal and accrued interest on
the prior financing agreements with Motorola.
Cash Flows. Net cash used in operating activities for the nine months ended
September 30, 1996 was $313,655,000 compared to $111,257,000 for the nine months
ended September 30, 1995. This increase is primarily attributable to the
increase in costs related to the Acquisitions and increased staffing and other
activities to support the implementation and operation of the Digital Mobile
networks. Net cash used in investing activities was $61,397,000 for the nine
months ended September 30, 1996, which includes a $46,211,000 use of cash for
capital expenditures primarily for the build out of the Digital Mobile networks,
-18-
<PAGE>
offset largely by net cash obtained from acquisitions totaling $33,665,000, and
a decrease in marketable securities of $64,452,000. Financing activities during
the nine months ended September 30, 1996 consisted primarily of net long-term
borrowings of $61,636,000, as well as $99,905,000 of cash received in connection
with the exercise of the Comcast anti-dilutive rights, offset by $37,336,000 of
cash expenditures for debt issuance costs. As a result of the above activities,
cash and cash equivalents decreased $121,318,000 during the nine months ended
September 30, 1996.
Future Capital Needs and Resources
Nextel anticipates that, for the foreseeable future, it will be utilizing
significant amounts of its available cash for capital expenditures for the
construction of Digital Mobile networks (including conversion of existing "first
generation" iDEN Digital Mobile networks to the Reconfigured iDEN technology
platform), operating expenses relating both to Digital Mobile network and to the
Company's analog SMR systems, potential acquisitions (including the acquisition
of rights to spectrum through the contemplated 800 MHz spectrum auction process
and investment in various potential international wireless communications
business opportunities) and other expenditures. Nextel anticipates that its cash
utilization for investment activities and operating losses will continue to
exceed its cash flows from operating activities over the next several years
during the start-up phase of its Digital Mobile networks and that it will be
necessary for Nextel to utilize its existing cash and funding from outside
sources to meet its cash needs resulting from such activities and losses.
Nextel believes that it has sufficient funds currently available or
reasonably expected to be accessible to it under its existing financing
facilities to meet its cash needs through the planned completion of its first
stage nationwide Digital Mobile networks build-out in 1998, in light of its
current (and currently committed) business and investment activities and
assuming a conservative ramp-up in Digital Mobile network subscriber growth.
Nextel currently anticipates that the funds available pursuant to the Bank
Credit Facility and the Vendor Credit Facility, together with the proceeds that
would be received by Nextel assuming the exercise of the currently outstanding
warrants and options to acquire shares of Nextel common stock, which warrants
and options are scheduled to expire unless exercised during such time period and
are generally described in Nextel's prior public filings, would be sufficient to
permit both the planned implementation of its nationwide Digital Mobile networks
and the pursuit of its other strategic objectives, including additional spectrum
acquisition activities and international investment opportunities. There can be
no assurance, however, that such outstanding warrants and options will be
exercised. Moreover, Nextel's public indentures contain provisions that operate
to limit the amount of borrowings available under the Bank Credit Facility and
the Vendor Credit Facility in certain circumstances. In addition, the Company's
capital needs, and its ability to adequately address those needs, through debt
or equity funding sources, are subject to a variety of factors that can not
presently be predicted with certainty, such as the commercial success of
Nextel's Digital Mobile networks incorporating the Reconfigured iDEN technology,
the amount and timing of the Company's capital expenditures and operating
losses, and the market price of the Company's common stock. See "--Liquidity and
Capital Resources--Bank Credit Facility and Vendor Credit Facility" and
"--Forward-Looking Statements."
For a more detailed discussion of certain of the factors and considerations
that could have a material effect on the timing and/or amount of future funding
required by the Company, see Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Future Capital Needs
and Resources," in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
-19-
<PAGE>
Forward-Looking Statements
"Safe Harbor" Statements under the Private Securities Litigation Reform Act
of 1995. A number of the matters and subject areas discussed in the foregoing
Management's Discussion and Analysis of Financial Condition and Results of
Operations (including the related discussions referred to above that are
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended by Form 10-K/A filed with the Commission on April 26, 1996
and Form 10-K/A2 filed with the Commission on May 17, 1996) that are not
historical or current facts deal with potential future circumstances and
developments. The discussion of such matters and subject areas is qualified by
the inherent risks and uncertainties surrounding future expectations generally,
and such discussion also may materially differ from Nextel's actual future
experience involving any one or more of such matters and subject areas. Nextel
has attempted to identify, in context, certain of the factors that it currently
believes may cause actual future experiences and results to differ from Nextel's
current expectations regarding the relevant matter or subject area. The
operation and results of Nextel's wireless communications business also may be
subject to the effect of other risks and uncertainties in addition to the
relevant qualifying factors identified elsewhere in the foregoing Management's
Discussion and Analysis of Financial Condition and Results of Operations,
including, but not limited to, general economic conditions in the geographic
areas and occupational market segments (such as construction, delivery, and real
estate management services) that Nextel is targeting for its Digital Mobile
network service, the availability of adequate quantities of system
infrastructure and subscriber equipment and components to meet Nextel's service
deployment and marketing plans and customer demand, the success of efforts to
improve and address satisfactorily issues relating to Digital Mobile network
performance, the successful development, testing and deployment of the
Reconfigured iDEN technology in accordance with Nextel's currently contemplated
nationwide Digital Mobile network build-out plan, the ability to achieve market
penetration and average subscriber revenue levels sufficient to provide
financial viability to the Digital Mobile network business, access to sufficient
debt or equity capital to meet Nextel's operating and financial needs, the
quality and price of similar or comparable wireless communications services
offered or to be offered by Nextel's competitors, including cellular and PCS
operators, future legislative or regulatory actions relating to SMR services,
other wireless communications services or telecommunications generally and other
risks and uncertainties described from time to time in Nextel's reports filed
with the Commission.
-20-
<PAGE>
Part II
Item 1. Legal Proceedings.
The Company is involved in legal proceedings that are described in its
Annual Report on Form 10-K for the year ended December 31, 1995 (as amended by
Form 10-K/A filed with the Commission on April 26, 1996 and Form 10-K/A2 filed
with the Commission on May 17, 1996). There were no material changes in the
status of those proceedings during the three months ended September 30, 1996.
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits.
Exhibit No. Exhibit Description
4.1 Registration Agreement, dated as of August 23,
1996, by and among Nextel, Grupo Communicaciones, San Luis,
S.A. de C.V. and each of the persons listed in Schedule 1
thereto (filed on October 23, 1996 as Exhibit 4.33 to
Amendment No. 1 to the Company's Registration Statement
on Form S-3 No. 333-11733 and incorporated herein by
reference).
10.1 Credit Agreement dated as of September 27, 1996 among
Nextel, NFC, the Restricted Companies party thereto, the
Lenders party thereto, Toronto-Dominion (Texas) Inc., as
Administrative Agent, and The Chase Manhattan Bank, as
Collateral Agent (filed on October 1, 1996 as Exhibit 99.1
to the Company's Current Report on Form 8-K dated September
27, 1996 (the "September 27 Form 8-K") and incorporated
herein by reference).
10.2 Amended, Restated and Consolidated Credit Agreement dated
as of September 27, 1996 among Nextel, NFC, the Restricted
Companies party thereto and the Vendors party thereto
(filed on October 1, 1996 as Exhibit 99.2 to the September
27 Form 8-K and incorporated herein by reference).
27* Financial Data Schedule.
----------------
* Submitted only with the electronic filing of this document with
the Commission pursuant to Regulation S-T under the Securities
Act of 1933, as amended
(b) Reports on Form 8-K.
(i) The Company filed a Current Report on Form 8-K dated and filed
with the Commission on July 5, 1996 reporting under Item 5 thereof
(i) the execution of an amendment to the existing equipment
purchase agreements between the Company and Motorola; (ii) an
agreement in principle between the Company and Motorola regarding
certain basic financing terms associated with the Company's
nationwide deployment of its Digital Mobile networks; and (iii)
the Company's placement of an order of more than $100,000,000 for
Motorola's infrastructure equipment and handsets.
(ii) The Company filed a Current Report on Form 8-K dated and
filed with the Commission on August 30, 1996 reporting under
Item 5 thereof the execution of a commitment letter and term
sheet dated August 16, 1996 between the Company, Chase Securities
Inc., J.P. Morgan Securities Inc. and Toronto-Dominion Securities
(USA), Inc. regarding the terms of a proposed secured credit
facility.
-21-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEXTEL COMMUNICATIONS, INC.
By: /s/STEVEN M. SHINDLER
Date: November 12, 1996 Steven M. Shindler
Senior Vice President
and Chief Financial Officer
-22-
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Description
4.1 Registration Agreement, dated as of August 23, 1996, by and among
Nextel, Grupo Communicaciones, San Luis, S.A. de C.V. and each of
the persons listed in Schedule 1 thereto (filed on October 23, 1996
as Exhibit 4.33 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 No. 333-11733 and incorporated herein by
reference).
10.1 Credit Agreement dated as of September 27, 1996 among Nextel, NFC,
the Restricted Companies party thereto, the Lenders party thereto,
Toronto-Dominion (Texas) Inc., as Administrative Agent, and The
Chase Manhattan Bank, as Collateral Agent (filed on October 1, 1996
as Exhibit 99.1 to the Company's Current Report on Form 8-K dated
September 27, 1996 (the "September 27 Form 8-K") and incorporated
herein by reference).
10.2 Amended, Restated and Consolidated Credit Agreement dated as of
September 27, 1996 among Nextel, NFC, the Restricted Companies party
thereto and the Vendors party thereto (filed on October 1, 1996 as
Exhibit 99.2 to the September 27 Form 8-K and incorporated herein by
reference).
27* Financial Data Schedule.
- ----------------
* Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T under the Securities Act of 1933,
as amended;
-i-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at June 30, 1996 (Unaudited) and the
Condensed Consolidated Statement of Operations for the Nine Months Ended
September 30, 1996 (Unaudited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 219,508
<SECURITIES> 4,998
<RECEIVABLES> 81,406
<ALLOWANCES> 7,169
<INVENTORY> 34,308
<CURRENT-ASSETS> 386,326
<PP&E> 1,430,954
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,989,318
<CURRENT-LIABILITIES> 190,066
<BONDS> 2,470,995
0
300,000
<COMMON> 228
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<NET-INCOME> (397,629)
<EPS-PRIMARY> (1.80)
<EPS-DILUTED> (1.80)
</TABLE>
